Correlation Between Amazon and E Mini
Can any of the company-specific risk be diversified away by investing in both Amazon and E Mini at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Amazon and E Mini into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and E Mini SP 500, you can compare the effects of market volatilities on Amazon and E Mini and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Amazon with a short position of E Mini. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and E Mini.
Diversification Opportunities for Amazon and E Mini
Very poor diversification
The 3 months correlation between Amazon and ESUSD is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and E Mini SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E Mini SP and Amazon is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Amazon Inc are associated (or correlated) with E Mini. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E Mini SP has no effect on the direction of Amazon i.e., Amazon and E Mini go up and down completely randomly.
Pair Corralation between Amazon and E Mini
Given the investment horizon of 90 days Amazon Inc is expected to generate 2.3 times more return on investment than E Mini. However, Amazon is 2.3 times more volatile than E Mini SP 500. It trades about 0.08 of its potential returns per unit of risk. E Mini SP 500 is currently generating about 0.12 per unit of risk. If you would invest 13,727 in Amazon Inc on August 29, 2024 and sell it today you would earn a total of 6,847 from holding Amazon Inc or generate 49.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 97.5% |
| Values | Daily Returns |
Amazon Inc vs. E Mini SP 500
Performance |
| Timeline |
| Amazon Inc |
| E Mini SP |
Amazon and E Mini Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and E Mini
The main advantage of trading using opposite Amazon and E Mini positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, E Mini can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in E Mini will offset losses from the drop in E Mini's long position.The idea behind Amazon Inc and E Mini SP 500 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Commodity Directory module to find actively traded commodities issued by global exchanges.
Other Complementary Tools
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency |